What Happens Once the Federal Solar Investment Tax Credit Expires?


Important update from December of 2015: The Residential Renewable Energy Tax Credit was extended and will remain at the 30% level until the end of 2019, but it will then ramp down incrementally through 2021. After 2023, the residential credit will drop to 0% while the commercial credit will drop to a permanent 10%.

The federal solar investment tax credit (“solar tax credit”) is a wildly successful incentive that has helped make the US a global leader in renewable energy.

How successful has the program been?

Since 2006, (the first year of the solar tax credit):

  • The cost of installing PV panels has fallen more than 70%.
  • The number of new installations has grown by more than 1,600%.

And it’s not terribly hard to understand why.

Under this program, you’re allowed to claim a 30% tax credit when you buy a new solar PV system using cash or loans. A $10,000 installation, for example, would result in a $3,000 credit. If your tax liability for the year is $5,000, you only have to pay $2,000 to the IRS.

This is much better than a standard deduction. Uncle Sam is giving you a free gift card that makes going solar much more affordable than it already is.

As a result, you pay less money upfront and enjoy a much shorter payback period.

You will pay up to 42% more without the federal solar tax credit.

But the solar tax credit won’t be around much longer. At the end of 2016, this incentive will disappear completely for residential customers and drop to 10% for commercial solar clients.

So what happens then?

Going Solar without the Solar Investment Tax Credit

Going solar will still be attractive—especially as the potential exists for utility rates to increase every year.

But without this generous incentive, your solar PV installation will become more expensive—up to 42% more.

A $10,000 installation really costs $7,000 with the solar tax credit. This is a reduction of 30%. But when you remove the incentive, you’re now paying full price.

Going from $7,000 to $10,000 is an increase of roughly 42%.

And this ratio holds true no matter what the original price of your solar installation is. Once you remove the incentive, the true cost increases by as much as 42.8%.

Is it possible to avoid paying this premium?


Go Solar Today and Claim Your Tax Credit While You Still Can

The solar tax credit officially disappears at the end of 2016:

  • Those who install panels before this fixed deadline enjoy the highest savings and ROIs.
  • Those who go solar in 2017 and beyond will pay much more for their installations.

Enjoy the highest savings with the federal solar tax credit.

Simple enough, right?

Almost, but not quite.

Because of the approaching deadline, there is a mad rush to get solar applications in on time. Many PV installers are completely backlogged trying to fulfill all of these orders. It’s possible that you could apply for a new installation “on-time” and still miss out on the solar tax credit.

The best way to avoid this is to go solar as soon as possible. To minimize the chances of missing this incredible incentive and paying more, request your free Direct Energy Solar quote today.